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Hurricane Harvey won't affect oil, will affect gas prices

Vehicles line up across the H-E-B parking lot Thursday Aug. 31, 2017, to fill up at the grocery store's gas station. Across Abilene and outside the city, many gas stations saw unusually long lines as customers filled up, panicked by reports of shortages in other parts of the state.(Photo: Ronald W. Erdrich/Reporter-News)Buy Photo

An Abilene oil and gas expert said that Hurricane Harvey is unlikely to have any effect on oil prices, though it has and certainly will continue to have, at least for a short while, an impact on gasoline prices.

“This is the time of year that refineries switch over to fall blends, and that normally puts upward pressure on gasoline prices,” said Dr. Paul Mason, dean of McMurry University’s business school. “But what we’ve seen over the last couple of weeks has been all about the hurricane and the shutdown in the Gulf and the increased difficulty that retail gasoline stations have had getting supplies. Because they’ve had short supplies of gas, they’ve jacked up the prices.”

On Aug. 31, many consumers throughout Texas, believing there was a gas shortage, jammed fuel stations despite Texas Railroad Commissioner Ryan Sitton advising consumers that it was them putting undue demand on fuel, making it difficult to resupply stations in a timely manner.

Sitton called the problem "simply one of demand and logistics."

“There is a challenge of logistics, getting that gasoline from where it is stored to the gas stations, and that is a real challenge and the people are working through that,” Stitton said at the time. “But that challenge has been surpassed by a run on gas stations."

According to Oil and Gas Journal, the U.S. Bureau of Safety and Environmental Enforcement reported that 18.5 percent of U.S. oil production, or 323,760 barrels per day had been shut-in as of Aug. 30.

BSEE also estimated that 18.98 percent of U.S. natural gas production had been halted.

As of Tuesday, Mason said that many of the Gulf refineries are already up and running, and so higher prices shouldn’t last too much longer.

And strangely enough, the recent runs on stations may even have a somewhat positive effect.

“Because so many people raced out and bought gasoline, there are actually going to be surpluses,” Mason said. “And as a consequence, the price (of fuel) will come back down.”

Much of the gasoline that comes into Abilene’s area comes from the west, he said, from Big Spring.

“Alon’s refinery is there, and there are a lot of Alon stations here in Abilene,” he said.

There should be no effect on oil prices themselves, Mason said.

“It’s a short-term impact in the refinery-to-gasoline realm, not oil prices,” he said. “I’m not aware of any major breakdown in pipelines, they were just shut down because of the water. So it shouldn’t affect oil prices.”

Retail stations will take likely advantage of higher prices as long as they can, Mason said.

“Their business is a very low-margin business, and any opportunity they have to increase their margins, they’re going to take advantage,” he said.

In a recent column, Alex Mills, the president of the Texas Alliance of Energy Producers, said refinery runs ahead of the storm were high, which has prevented much larger spikes in gasoline prices.

“The refineries on the Gulf coast have an oversupply of crude oil,” he wrote. “When the refineries become operational again, the undersupply of refined products (gasoline) will be replenished.”

On NYMEX, crude oil was trading at around $49.22 per barrel as of 11:30 a.m. CST Wednesday, up slightly from $48.66 the day before, after hitting a month-long low of $45.96 Aug. 30.

The national price of gas was at a high of $2.67 a gallon, compared to a low of $2.32 cents a gallon Aug. 20, according to Gasbuddy.com.